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CONTENTS
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iii
Foreword
DEVELOPMENT
Chapter 2
SECTORS
OF
THE
INDIAN
ECONOMY
18
Chapter 3
MONEY
AND
CREDIT
38
Chapter 4
GLOBALISATION
AND
THE
INDIAN
ECONOMY
54
Chapter 5
CONSUMER
RIGHTS
Suggested Readings
74
90
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NOTES
FOR
THE
TEACHER
NOTES
FOR
TEACHERS
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CHAPTER I : DEVELOPMENT
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DEVELOPMENT
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CHAPTER I
DEVELOPMENT
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WHAT DEVELOPMENT PROMISES
DIFFERENT PEOPLE, DIFFERENT GOALS
Let us try to imagine what
development or progress is likely to
mean to different persons listed in
Table 1.1. What are their aspirations?
You will find that some columns are
partially filled. Try to complete the
table. You can also add any other
category of persons.
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which are conflicting. A girl expects
as much freedom and opportunity as
her brother, and that he also shares
in the household work. Her brother
may not like this. Similarly, to get
more electricity, industrialists may
want more dams. But this may
submerge the land and disrupt the
lives of people who are displaced such
as tribals. They might resent this and
may prefer small check dams or tanks
to irrigate their land.
THOSE PEOPLE
DONT WANT TO
DEVELOP!
A demonstration
meeting against
raising the height
of Sardar
Sarovar Dam on
Narmada River
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However, it will be wrong to conclude
that what cannot be measured is not
important.
Consider another example. If you
get a job in a far off place, before
accepting it you would try to consider
many factors, apart from income,
such as facilities for your family,
working atmosphere, or opportunity
to learn. In another case, a job may
give you less pay but may offer regular
employment that enhances your
sense of security. Another job,
however, may offer high pay but no
job security and also leave no time for
your family. This will reduce your
sense of security and freedom.
NATIONAL DEVELOPMENT
If, as we have seen above, individuals
seek different goals, then their notion
of national development is also likely
to be different. Discuss among
yourselves on what India should do
for development.
Most likely, you would find that
different students in the class have given
different answers to the above question.
In fact, you might yourself think of
many different answers and not be too
sure of any of these. It is very
important to keep in mind that
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LETS WORK THESE OUT
Discuss the following situations:
1. Look at the picture on the right. What should
be the developmental goals for such an area?
2. Read this newspaper report and answer the
questions that follow:
0 tonnes
A vessel dumped 50
es in to
st
wa
of liq ui d to xic
y and
cit
a
in
s
mp
open-air du
a.
se This
in the surrounding
y ca lle d
cit
ha pp en ed in a
as t, a
Co
y
or
Iv
Ab id ja n in
fumes
e
Th
a.
ric
Af
country in
xic wa ste
fro m th e hi gh ly to
rashes,
in
sk
caused nausea,
After a
.
etc
a
oe
fainting, diarrh
we re
s
on
rs
pe
n
ve
mo nt h se
and
l
ita
sp
dead, twenty in ho
ed
at
tre
nd
twenty six thousa
g.
nin
iso
po
of
for symptoms
mpany
A multinational co
an d
m
leu
de al in g in pe tro
al
loc
a
d
cte
ra
nt
co
metals had
to
t
as
Co
company of the Ivory
m
fro
ste
dispose the toxic wa
its ship.
(i) Who are the people who benefited
and who did not?
(ii) What should be the developmental
goal for this country?
3. What can be some of the developmental goals for your village, town or locality?
ACTIVITY 1
If even the idea of what constitutes
development can be varied and
conflicting, then certainly there can be
differences about ways of developing. If
you know of any such
controversy, try to find out
arguments advanced by different
people. You may do so by talking to
different persons or you may find it from
newspapers and television.
DEVELOPMENT
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HOW TO COMPARE DIFFERENT COUNTRIES
OR STATES?
You might ask if development can
mean different things, how come some
countries are generally called
developed and others under developed? Before we come to this,
let us consider another question.
When we compare different things,
they could have similarities as well as
differences. Which aspects do we use
to compare them? Let us look at
students in the class itself. How do
we compare different students? They
differ in their height, health, talents
and interests. The healthiest student
may not be the most studious one.
The most intelligent student may not
be the friendliest one. So, how do we
compare students? The criterion we
may use depends on the purpose of
comparison. We use different criterion
to choose a sports team, a debate
team, a music team or a team to
organise a picnic. Still, if for some
purpose, we have to choose the
criterion for the all-round progress of
children in the class, how shall we
do it?
Usually we take one or more
important characteristics of
persons and compare them based
on these characteristics. Of
course, there can be differences about
what are important characteristics
that should form the basis of
comparison: friendliness and spirit of
cooperation, creativity or marks
secured?
This is true of development too.
For comparing countries, their
income is considered to be one of
the most important attributes.
Countries with higher income are
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Average Income
While averages are useful for comparison, they also hide disparities.
For example, let us consider two countries, A and
B. For the sake of simplicity, we have assumed
that they have only five citizens each. Based on
data given in Table 1.2, calculate the
average income for both the countries.
II
III
IV
Average
500
500
500
500
48000
WE
MADE THE
CHAIRS
AND WE
USE
THEM.
WE
MADE THE
CHAIRS
AND HE
TOOK
THEM.
3. Besides size of per capita income, what other property of income is important in
comparing two or more societies?
4. Suppose records show that the average income in a country has been increasing
over a period of time. From this, can we conclude that all sections of the economy
have become better? Illustrate your answer with an example.
5. From the text, find out the per capita income level of middle-income countries as
per WDR 2006.
6. Write a paragraph on your notion of what should India do, or achieve, to become a
developed country.
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INCOME AND OTHER CRITERIA
When we looked at individual
aspirations and goals, we
found that people not only
think of better income but
also have goals such as
security, respect for others,
equal treatment, freedom etc.
in mind. Similarly, when we
think of a nation or a region,
we may, besides average
income, think of other equally
important attributes.
Punjab
49
70
81
Kerala
11
91
91
Bihar
60
47
41
10
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What does this table show? The
first column of the table shows that in
Kerala, out of 1000 children born alive
11 died before completing one year of
age but in Punjab the proportion of
children dying within one year of birth
is 49, which is nearly five times more.
On the other hand, the per capita
income of Punjab is much more than
Kerala as shown in Table 1.3. Just
think of how dear you are to your
parents, think of how every one is so
happy when a child is born. Now, try
to think of parents whose children die
before they even celebrate their first
birthday. How painful it must be to
these parents? Next, note the year to
which this data pertains. It is 2003.
So we are not talking of old times; it is
56 years after independence when our
metro towns are full of high-rise
buildings and shopping malls!
PUBLIC FACILITIES
How is it that the average person in
Punjab has more income than the
average person in Kerala but lags
behind in these crucial areas? The
reason is money in your pocket
cannot buy all the goods and
services that you may need to live
well. So, income by itself is not a
completely adequate indicator of
material goods and services that
citizens are able to use. For example,
normally, your money cannot buy
you a pollution-free environment or
ensure that you get unadulterated
medicines, unless you can afford to
shift to a community that already has
all these things. Money may also not
be able to protect you from infectious
diseases, unless the whole of your
community takes preventive steps.
DEVELOPMENT
11
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Kerala has a low Infant Mortality
Rate because it has adequate
provision of basic health and
educational facilities. Similarly, in
some states, the Public Distribution
System (PDS) functions well. If some
ACTIVITY 2
Study Table 1.5 carefully and fill in the blanks in the following paragraphs. For this,
you may need to make calculations based on the table.
Male
Female
52%
19%
68%
39%
64%
31%
(a) The literacy rate for all age groups, including young and old, is _____ for rural
males and _____ for rural females. However, it is not just that these many
adults could not attend school but that there are _____ who are currently not in
school.
(b) It is clear from the table that _____ % of rural girls and _____% of rural boys are
not attending school. Therefore, illiteracy among children in the age group 1014 is as high as _____% for rural females and _____% for rural males.
(c) This high level of illiteracy among __________ age group, even after more than
60 years of our independence, is most disturbing. In many other states also
we are nowhere near realisation of the constitutional goal of free and compulsory
education for all children up to the age of 14, which was expected to be achieved
by 1960.
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HUMAN DEVELOPMENT
REPORT
ACTIVITY 3
One way to find out if adults are undernourished is to
calculate what nutrition scientists call Body Mass
Index (BMI). This is easy to calculate. Take the weight
of the person in kg. Then take the height in metres.
Divide the weight by the square of the height. If this
figure is less than 18.5 then the person would be
considered undernourished. However, if this BMI is
more than 25, then a person is overweight. Do
remember that this criterion is not applicable to growing
children.
Sri Lanka
India
Myanmar
Pakistan
Nepal
Bangladesh
Per Capita
Income
in US$
Life
expectancy
at birth
Literacy rate
for 15+ yrs
population
Gross enrolment
ratio for three
levels
HDI rank in
the world
4390
3139
1027
2225
1490
1870
74
64
61
63
62
63
91
61
90
50
50
41
69
60
48
35
61
53
93
126
130
134
138
137
NOTES
1. HDI stands for Human Development Index. HDI ranks in above table are out of 177 countries in all.
2. Life expectancy at birth denotes, as the name suggests, average expected length of life of a person at
the time of birth.
3. Gross Enrolment Ratio for three levels means enrolment ratio for primary school, secondary school and
higher education beyond secondary school.
4. Per Capita Income is calculated in dollars for all countries so that it can be compared. It is also done in
a way so that every dollar would buy the same amount of goods and services in any country.
DEVELOPMENT
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Isnt it surprising that a small
country in our neighbourhood, Sri
Lanka, is much ahead of India in every
respect and a big country like ours
has such a low rank in the world?
Table 1.6 also shows that though
Nepal has half the per capita income
of India, yet it is not far behind India
in life expectancy and literacy levels.
Many improvements have been
suggested in calculating HDI and
many new components have been
SUSTAINABILITY OF DEVELOPMENT
Whichever
way
we
define
development, suppose for the present
that a particular country is quite
developed. We would certainly like this
level of development to go up further
or at least be maintained for future
generations. This is obviously
desirable. However, since the second
half of the twentieth century, a number
of scientists have been warning that
the present type, and levels, of
development are not sustainable.
ND WHY
LETS UNDERSTA
H THE
UG
RO
THIS IS SO TH
PLE:
AM
EX
G
IN
OW
LL
FO
14
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Groundwater is an example of
renewable resources. These resources
are replenished by nature as in the
case of crops and plants. However,
even these resources may be
overused. For example, in the case of
groundwater, if we use more than
what is being replenished by rain then
we would be overusing this resource.
Example 2: Exhaustion of
Natural Resources
Look at the following data for crude oil.
Reserves
(Billion Tonnes)
Middle East
89
United States of America
4
World
137
Number of Years
Reserves will last
93
10
43
DEVELOPMENT
15
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Consequences of environmental
degradation do not respect national
or state boundaries; this issue is
no longer region or nation specific.
Our future is linked together.
Sustainability of development is
comparatively a new area of
knowledge in which scientists,
economists, philosophers and other
EXERCISES
1. Development of a country can generally be determined by
(i) its per capita income
(ii) its average literacy level
(iii) health status of its people
(iv) all the above
2. Which of the following neighbouring countries has better performance in terms of
human development than India?
(i) Bangladesh
(ii) Sri Lanka
(iii) Nepal
(iv) Pakistan
3. Assume there are four families in a country. The average per capita income of
these families is Rs 5000. If the income of three families is Rs 4000, Rs 7000
and Rs 3000 respectively, what is the income of the fourth family?
(i) Rs 7500
(ii) Rs 3000
(iii) Rs 2000
(iv) Rs 6000
4. What is the main criterion used by the World Bank in classifying different
countries? What are the limitations of this criterion, if any?
5. In what respects is the criterion used by the UNDP for measuring development
different from the one used by the World Bank?
6. Why do we use averages? Are there any limitations to their use? Illustrate with
your own examples related to development.
7. Kerala, with lower per capita income has a better human development ranking
than Punjab. Hence, per capita income is not a useful criterion at all and should
not be used to compare states. Do you agree? Discuss.
8. Find out present sources of energy used by people in India. What could be
possibilities fifty years from now?
9. Why is the issue of sustainability important for development?
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10. The Earth has enough resources to meet the needs of all but not enough to
satisfy the greed of even one person. How is this statement relevant to the
disscusion of development? Discuss.
11. List a few examples of environmental degradation that you may have observed
around you.
12. For each of the items given in Table 1.6, find out which country is at the top and
which is at the bottom.
13. The following table shows the proportion of undernourished adults in India. It is
based on a survey of various states for the year 2001. Look at the table and
answer the following questions.
State
Male
(%)
Female
(%)
Kerala
Karnataka
Madhya Pradesh
22
36
43
19
38
42
All States
37
36
(i) Compare the nutritional level of people in Kerala and Madhya Pradesh.
(ii) Can you guess why around 40 per cent of people in the country are
undernourished even though it is argued that there is enough food in the
country? Describe in your own words.
DEVELOPMENT
17
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NOTES FOR THE TEACHER
CHAPTER 2: SECTORS OF THE INDIAN ECONOMY
An economy is best understood when we
study its components or sectors. Sectoral
classification can be done on the basis of
several criteria. In this chapter, three
types of classifications are discussed:
primary/secondary/tertiary; organised/
unorganised; and public/private. You can
create a discussion about these types by
taking examples familiar to the students
and relate them to their daily life. It is
important to emphasise the changing
roles of sectors. This can be highlighted
further by drawing attention of the
students to the rapid growth of service
sector. While elaborating the ideas
provided in the chapter, the students may
need to be familiarised with a few
fundamental concepts such as Gross
Domestic Product, Employment etc. Since
the students may find this difficult to
understand, it is necessary to explain to
them through examples. Several activities
and exercises are suggested in the chapter
to help the students understand how a
persons activity could be placed
whether in the primary, secondary or
tertiary, organised or unorganised, and
public or private sector. You may
encourage the students to talk to various
working people around them (such as
shop owners, casual workers, vegetable
vendors, workshop mechanics, domestic
workers etc.) to know more about how they
live and work. Based on such information,
the students can be encouraged to develop
their own classification of economic
activities.
Another important issue to be
highlighted is about the problems caused
by the changes in the roles of sectors.
The chapter has taken the example of
unemployment and what the government
can do to solve it. The declining importance
18
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CHAPTER 2
SECTORS
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at different
We begin by looking
ities.
kind of economic activ
Primary
(Agriculture)
Sector
produces
natural
goods
Secondary
(Industrial)
Sector
produces
manufactured
goods
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different categories,
e grouped into three
ar
,
gh
ou
th
,
es
iti
tiv
Economic ac
e examples.
nt. Let us look at som
de
en
ep
rd
te
in
ly
gh
are hi
Tailor
Money lender
Basket weaver
Gardener
Flower cultivator
Potter
Milk vendor
Bee-keeper
Fishermen
Astronaut
Priest
Courier
4. Students in a school are often classified into primary and secondary or junior and
senior. What is the criterion that is used? Do you think this is a useful classification?
Discuss.
S ECTORS
OF THE
I NDIAN E CONOMY
21
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COMPARING THE THREE SECTORS
The various production activities in the primary, secondary
and tertiary sectors produce a very large number of goods
and services. Also, the three sectors have a large number of
people working in them to produce these goods and services.
The next step, therefore, is to see how much goods and services
are produced and how many people work in each sector. In
an economy there could be one or more sectors which are
dominant in terms of total production and employment, while
other sectors are relatively small in size.
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value of all other intermediate goods
would have been included. To count
the value of the flour and wheat
separately is therefore not correct
because then we would be counting
the value of the same things a number
of times. First as wheat, then as flour
and finally as biscuits.
The value of final goods and
services produced in each sector
during a particular year provides
the total production of the sector
for that year. And the sum of
production in the three sectors gives
what is called the Gross Domestic
Product (GDP) of a country. It is the
value of all final goods and services
produced within a country during a
particular year. GDP shows how big
the economy is.
In India, the mammoth task of
measuring GDP is undertaken by a
central government ministry. This
Ministry, with the help of various
government departments of all the
Indian states and union territories,
collects information relating to total
volume of goods and services and their
prices and then estimates the GDP.
S ECTORS
OF THE
I NDIAN E CONOMY
23
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PRIMARY, SECONDARY AND TERTIARY
SECTORS IN INDIA
Rupees (Crore)
210000
200000
190000
180000
170000
160000
150000
140000
130000
120000
110000
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Tertiary sector
Secondary sector
Primary sector
1973
rison
What does the compa
show?
03
20
between 1973 and
draw
we
n
What conclusions ca
?
from the comparison
t.
ou
d
Lets fin
24
2003
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100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Tertiary sector
GDP
Secondary sector
Primary sector
1973
2003
Tertiary sector
Employment
Secondary sector
Primary sector
1973
2000
S ECTORS
OF THE
I NDIAN E CONOMY
25
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though industrial output or the
production of goods went up by
eight times during the period,
employment in the industry went
up by only 2.5 times. The same
applies to tertiary sector as
well. While production in the service
sector rose by 11 times, employment
in the service sector rose less than
three times.
As a result, more than half of the
workers in the country are working
in the primary sector, mainly in
agriculture, producing only a
quarter of the GDP. In contrast to
this, the secondary and tertiary
sectors produce three-fourth of the
produce whereas they employ less
than half the people. Does this mean
that the workers in agriculture are
not producing as much as they
could?
What it means is that there are
more people in agriculture than is
necessary. So, even if you move a few
people out, production will not be
affected. In other words, workers in
agricultural sector are underemployed.
For instance, take the case of a
small farmer, Laxmi , owning about
two hectares of unirrigated land
dependent only on rain and
growing crops like jowar and arhar.
All five members of her family work
in the plot throughout the year.
Why? They have nowhere else to go
for work. You will see that everyone
is working, none remains idle, but
in actual fact their labour effort
gets divided. Each one is doing
some work but no one is fully
employed. This is the situation of
underemployment, where people
are apparently working but all
of them are made to work less
than their potential. This kind of
26
underemployment is hidden in
contrast to someone who does not
have a job and is clearly visible as
unemployed. Hence, it is also
called disguised unemployment.
Now, supposing a landlord,
Sukhram, comes and hires one or
two members of the family to work
on his land. Laxmis family is now
able to earn some extra income
through wages. Since you do not
need five people to look after that
small plot, two people moving out
does not affect production on their
farm. In the above example, two
people may move to work in a
factory. Once again the earnings of
the family would increase and they
would also continue to produce as
much from their land.
There are lakhs of farmers like
Laxmi in India. This means that even
if we remove a lot of people from
agricultural sector and provide them
with proper work elsewhere,
agricultural production will not
suffer. The incomes of the people who
take up other work would increase
the total family income.
This underemployment can also
happen in other sectors. For
example there are thousands of
casual workers in the service
sector in urban areas who search
for daily employment. They are
employed as painters, plumbers,
repair persons and others doing
odd jobs. Many of them dont find
work everyday. Similarly, we see
other people of the service sector
on the street pushing a cart or
selling something where they may
spend the whole day but earn
very little. They are doing this
work because they do not have
better opportunities.
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LETS WORK THESE OUT
1. Complete the table using the data given in Graphs 2 and 3 and answer the question
that follows.
2000 or 2003
Share in GDP
Share in employment
What are the changes that you observe in the primary sector over a span of thirty
years?
2. Choose the correct answer:
Underemployment occurs when people
(i) do not want to work
(ii) are working in a lazy manner
(iii) are working less than what they are capable of doing
(iv) are not paid for their work
3. Compare and contrast the changes in India with the pattern that was observed for
developed countries. What kind of changes between sectors were desired but did
not happen in India?
4. Why should we be worried about underemployment?
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Gur Making in
Haryana
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schools. The rest are not they may
be at home or many of them may be
working as child labourers. If these
children are to attend schools, we will
require more buildings, more teachers
and other staff. A study conducted by
the Planning Commission estimates
that nearly 20 lakh jobs can be
created in the education sector alone.
Similarly, if we are to improve the
health situation, we need many more
doctors, nurses, health workers etc.
to work in rural areas. These are some
ways by which jobs would be created
and we would also be able to address
the important aspects of development
talked about in Chapter 1.
Every state or region has potential
for increasing the income and
employment for people in that area.
It could be tourism, or regional craft
industry, or new services like IT. Some
of these would require proper
planning and support from the
government. For example, the same
study by the Planning Commission
says that if tourism as a sector is
improved, every year we can give
additional employment to more than
35 lakh people.
We must realise that some of the
suggestions discussed above would
take a long time to implement. For
the short-term, we need some quick
measures. Recognising this, the
central government in India recently
made a law implementing the Right
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DIVISION OF SECTORS AS ORGANISED AND
UNORGANISED
Let us examine another way of classifying activities in the economy. This looks
at the way people are employed. What are their conditions of work? Are there
any rules and regulations that are followed as regards their employment?
Ka n ta
Kamal
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these benefits? They get paid leave,
payment during holidays, provident
fund, gratuity etc. They are supposed
to get medical benefits and, under the
laws, the factory manager has to
ensure facilities like drinking water
and a safe working environment.
When they retire, these workers get
pensions as well.
In contrast, Kamal works in the
unorganised sector. The unorganised
sector is characterised by small and
scattered units which are largely
outside the control of the government.
There are rules and regulations but
these are not followed. Jobs here are
Organised
2
9
17
28
Unorganised
54
76
Total
242
63
93
100%
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How to Protect Workers in
the Unorganised Sector?
The organised sector offers jobs that
are the most sought-after. But the
employment opportunities in the
organised sector have been expanding
very slowly. It is also common to find
many organised sector enterprises in
the unorganised sector. They adopt
such strategies to evade taxes and
refuse to follow laws that protect
labourers. As a result, a large number
of workers are forced to enter the
unorganised sector jobs, which pay a
very low salary. They are often
exploited and not paid a fair wage.
Their earnings are low and not
regular. These jobs are not secure and
have no other benefits.
Since the 1990s, it is also common
to see a large number of workers
losing their jobs in the organised
sector. These workers are forced to
take up jobs in the unorganised
sector with low earnings. Hence,
besides the need for more work, there
is also a need for protection and
support of the workers in the
unorganised sector.
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LETS RECALL
With so many activities taking place around us, one needs to use the
process of classification to think in a useful manner. The criterion for
classification could be many depending on what we desire to find out.
The process of classification helps to analyse a situation.
In dividing the economic activities into three sectors primary,
secondary, tertiary the criterion used was the nature of activity. On
the basis of this classification, we were able to analyse the pattern of total
production and employment in India. Similarly, we divided the economic
activities into organised and unorganised and used the classification to
look at employment in the two sectors.
What was the most important conclusion that was derived from the
classification exercises? What were the problems and solutions that were
indicated? Can you summarise the information in the following table?
Criteria used
Primary,
Secondary,
Tertiary
Nature
of activity
Most important
conclusion
Organised,
Unorganised
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of the private sector. Also, collecting
money from thousands of people who
use these facilities is not easy. Even if
they do provide these things they
would charge a high rate for their
use. Examples are construction of
roads, bridges, railways, harbours,
generating electricity, providing
irrigation through dams etc. Thus,
governments have to undertake such
heavy spending and ensure that
these facilities are available for
everyone.
There are some activities, which
the government has to support. The
private sector may not continue their
production or business unless
government encourages it. For
example, selling electricity at the cost
of generation may push up the costs
of production of industries. Many
units, especially small-scale units,
might have to shut down. Government
here steps in by producing and supplying electricity at rates which these
industries can afford. Government
has to bear part of the cost.
Similarly, the government in India
buys wheat and rice from farmers at
a fair price. This it stores in its
godowns and sells at a lower price to
consumers through ration shops. You
have read about this in the chapter
on Food Security in Class IX. The
government has to bear some of the
SUMMING UP
In this chapter we have looked at ways of
classifying economic activities into some
meaningful groups. One way of doing this
is to examine whether the activity relates to
the primary, secondary or tertiary sectors.
The data for India, for the last thirty years,
shows that while goods and services
produced in the tertiary sector contribute
the most to GDP, the employment remains
in the primary sector. We have also seen
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EXERCISES
1. Fill in the blanks using the correct option given in the bracket:
(i) Employment in the service sector _________ increased to the same extent
as production. (has / has not)
(ii) Workers in the _________ sector do not produce goods.
(tertiary / agricultural)
(iii) Most of the workers in the _________ sector enjoy job security.
(organised / unorganised)
(iv) A _________ proportion of labourers in India are working in the unorganised
sector. (large / small)
(v) Cotton is a _________ product and cloth is a _________ product.
[natural /manufactured]
(vi) The activities in primary, secondary and tertiary sectors are_________
[independent / interdependent]
2. Choose the most appropriate answer.
(a) The sectors are classified into public and private sector on the basis of:
(i) employment conditions
(ii) the nature of economic activity
(iii) ownership of enterprises
(iv) number of workers employed in the enterprise
(b) Production of a commodity, mostly through the natural process, is an
activity in _________ sector.
(i) primary
(ii) secondary
(iii) tertiary
(iv) information technology
(c) GDP is the total value of _________ produced during a particular year.
(i) all goods and services
(ii) all final goods and services
(iii) all intermediate goods and services
(iv) all intermediate and final goods and services
(d) In terms of GDP the share of tertiary sector in 2003 is _________
(i) between 20 per cent to 30 per cent
(ii) between 30 per cent to 40 per cent
(iii) between 50 per cent to 60 per cent
(iv) 70 per cent
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3. Match the following:
Problems faced by farming sector
1. Unirrigated land
2. Low prices for crops
3. Debt burden
4. No job in the off season
5. Compelled to sell their grains to
the local traders soon after harvest
5. A research scholar looked at the working people in the city of Surat and found
the following.
Place of work
In offices and factories registered
with the government
Nature of employment
Organised
15
15
20
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13. Service sector in India employs two different kinds of people. Who are these?
14. Workers are exploited in the unorganised sector. Do you agree with this view?
Give reasons in support of your answer.
15. How are the activities in the economy classified on the basis of employment
conditions?
16. Compare the employment conditions prevailing in the organised and unorganised
sectors.
17. Explain the objective of implementing the NREGA 2005.
18. Using examples from your area compare and contrast that activities and functions
of private and public sectors.
19. Discuss and fill the following table giving one example each from your area.
Well managed organisation
Public sector
Private Sector
20. Give a few examples of public sector activities and explain why the government
has taken them up.
21. Explain how public sector contributes to the economic development of a nation.
22. The workers in the unorganised sector need protection on the following issues :
wages, safety and health. Explain with examples.
23. A study in Ahmedabad found that out of 15,00,000 workers in the city, 11,00,000
worked in the unorganised sector. The total income of the city in this year
(1997-1998) was Rs 60,000 million. Out of this Rs 32,000 million was generated
in the organised sector. Present this data as a table. What kind of ways should
be thought of for generating more employment in the city?
24.
The following table gives the GDP in Rupees (Crores) by the three sectors:
Year
primary
secondary
tertiary
1950
2000
80,000
19,000
39,000
3,14,000
2,80,000
5,55,000
(i)
Calculate the share of the three sectors in GDP for 1950 and 2000.
(ii)
(iii)
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NOTES FOR THE TEACHER
CHAPTER 3 : MONEY AND CREDIT
Money is a fascinating subject and full of
curiosities. It is important to capture this
element for the students. The history of
money and how various forms were used at
different times is an interesting story. At this
stage the purpose is to allow students to
realise the social situation in which these
forms were used. Modern forms of money
are linked to the banking system. This is the
central idea of the first part of the chapter.
The present situation in India, where
newer forms of money are slowly spreading
with computerisation of the banking system,
offers many opportunities to students to
explore on their own. We need not get into a
formal discussion of the functions of money
but let it come up as questions. There are
certain areas that are not covered such as
creation of money (money multiplier) or the
backing of the modern system that may be
discussed if you desire.
Credit is a crucial element in economic
life and it is therefore important to first
understand this in a conceptual manner.
What are the aspects that one looks at in
any credit arrangement and how this affects
people is the main focus of the second part
of the chapter. The world around us offers
a tremendous variety of such arrangements
and it would be ideal to explain these
aspects of credit from situations that are
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CHAPTER 3
MONEY
CREDIT
AND
I DONT NEED
SHOES. I NEED
CLOTHES.
I WANT SHOES.
BUT I DONT HAVE
WHEAT.
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wheat. All he has to do is find a buyer
for his shoes. Once he has exchanged
his shoes for money, he can purchase
wheat or any other commodity in the
market. Since money acts as an
intermediate in the exchange process,
it is called a medium of exchange.
Gupta
coins
Tughlaq
coin
Gold
Mohar
from
Akbars
reign
Currency
Modern coin
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Demand deposits offer another
interesting facility. It is this facility
which lends it the essential
characteristics of money (that of a
medium of exchange). You would
have heard of payments being
UNDERSTAND
LET US TRY AND
ENTS ARE
YM
PA
UE
HOW CHEQ
ISED WITH
MADE AND REAL
PL
AN EXAM E.
Cheque Payments
A shoe manufacturer, M. Salim has to make a payment to the leather supplier and writes
a cheque for a specific amount. This means that the shoe manufacturer instructs his
bank to pay this amount to the leather supplier. The leather supplier takes this cheque,
and deposits it in his own account in the bank. The money is transferred from one bank
account to another bank account in a couple of days. The transaction is complete without
any payment of cash.
Account number
Bank branch
code
Cheque number
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LETS WORK THESE OUT
1. M. Salim wants to withdraw Rs 20,000 in cash for making payments. How would he
write a cheque to withdraw money?
2. Tick the correct answer.
After the transaction between Salim and Prem,
(i) Salims balance in his bank account increases, and Prems balance increases.
(ii) Salims balance in his bank account decreases and Prems balance increases.
(iii) Salims balance in his bank account increases and Prems balance decreases.
3. Why are demand deposits considered as money?
DEPOSITORS
People make
deposits
People make
withdrawals and
get interest
42
BORROWERS
People take
loans
People repay
loans with
interest
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TWO DIFFERENT CREDIT SITUATIONS
A large number of transactions in our day-to-day activities
involve credit in some form or the other. Credit (loan) refers to
an agreement in which the lender supplies the borrower with
money, goods or services in return for the promise of future
payment. Let us see how credit works through the following
two examples.
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In rural areas, the main demand
for credit is for crop production. Crop
production involves considerable
costs on seeds, fertilisers, pesticides,
water, electricity, repair of equipment,
etc. There is a minimum stretch of
three to four months between the time
when the farmers buy these inputs
and when they sell the crop. Farmers
usually take crop loans at the
beginning of the season and repay the
loan after harvest. Repayment of the
loan is crucially dependent on the
income from farming.
TERMS OF CREDIT
Every loan agreement specifies an
interest rate which the borrower must
pay to the lender along with the
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A House Loan
Megha has taken a loan of Rs 5 lakhs from the
bank to purchase a house. The annual interest
rate on the loan is 12 per cent and the loan is to
be repaid in 10 years in monthly instalments.
Megha had to submit to the bank, documents
showing her employment records and salary
before the bank agreed to give her the loan. The
bank retained as collateral the papers of the new
house, which will be returned to Megha only
when she repays the entire loan with interest.
Fill the following details of Meghas housing loan.
Loan amount (in Rupees)
Duration of loan
Documents required
Interest rate
Mode of repayment
Collateral
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Variety of Credit Arrangements
Example of a Village
Rohit and Ranjan had finished reading about the terms of credit in class.
They were eager to know the various credit arrangements that existed in
their area: who were the people who provided credit? Who were the
borrowers? What were the terms of credit? They decided to talk to some
people in their village. Read what they record...
er s a n d
6.
e m o s t fa rm fields
er
15th Nov, 200
h
w
s
d
el
fi
e day. The
tl y fo r th e
W e h ea d d ir ec be working at this time of th hyamal, a small
S
labourers would potato crops. We first meet
h
it
w
.
d
ge
te
ted villa
are plan
r, a small irriga
We next meet Arun who is supervising the
farmer in Sonpu
work of one farm labourer. Arun has seven
Shyamal tells us that every season he needs
acres of land. He is one of the few persons
loans for cultivation on his 1.5 acres of land. Till
in Sonpur to receive bank loan for
a few years back, he would borrow money from
cultivation. The interest rate on the loan
the village moneylender at an interest rate of
is 8.5 per cent per annum, and can be repaid
five per cent per month (60% per annum).
anytime in the next three years. Arun plans
For the last few years, Shyamal has been
to repay the loan after harvest by selling a
borrowing from an agricultural trader in the
part of the crop. He then intends to store
village at an interest rate of three per cent
the rest of the potatoes in a cold storage
per month. At the beginning of the cropping
and apply for a fresh loan from the bank
season, the trader supplies the farm inputs on
against the cold storage receipt. The bank
credit, which is to be repaid when the crops
offers this facility to farmers who have
are ready for harvest.
taken crop loan from them.
Besides the interest charge on the loan, the
Rama is working in a neigh
trader also makes the farmers promise to
bouri
wo
rks as an agricultural lab ng field. She
sell the crop to him. This way the trader
several months in the ye ourer. There are
can ensure that the money is repaid
ar when Rama has
no work, and needs credit
promptly. Also, since the crop prices are low
to meet the daily
expenses. Expenses on
after the harvest, the trader is able to
sudden illnesses or
functions in the family ar
make a profit from buying the crop at a low
e also met through
loa
ns. Rama has to depend
price from the farmers and then selling it
on her employer,
a medium landowner in
later when the price has risen.
Sonpur, for credit.
The landowner charges
an interest rate of
5 per cent per month.
Rama repays the
money by working for th
e landowner. Most
of the time, Rama has to
take a fresh loan,
before the previous loa
n has been repaid.
At pr es en t, sh e ow es
th e lan do wn er
Rs 5,000. Though the
landowner doesnt
treat her well, she continu
es to work for him
since she can get loans
from him when in
need. Rama tells us that
th
credit for the landless pe e only source of
ople in Sonpur are
the landowner-employers.
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Loans from Cooperatives
Besides banks, the other major source of cheap credit
in rural areas are the cooperative societies (or
cooperatives). Members of a cooperative pool their
resources for cooperation in certain areas. There are
several types of cooperatives possible such as
far mers cooperatives, weavers cooperatives,
industrial workers cooperatives, etc. Krishak
Cooperative functions in a village not very far away
from Sonpur. It has 2300 farmers as members. It
accepts deposits from its members. With these
deposits as collateral, the Cooperative has obtained
a large loan from the bank. These funds are used to
provide loans to members. Once these loans are
repaid, another round of lending can take place.
Krishak Cooperative provides loans for the purchase
of agricultural implements, loans for cultivation
and agricultural trade, fishery loans, loans for
construction of houses and for a variety of other
expenses.
7. Talk to some people to find out the credit arrangements that exist in your area. Record
your conversation. Note the differences in the terms of credit across people.
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FORMAL SECTOR CREDIT IN INDIA
We have seen in the
Graph 1 : Sources of Credit
above examples that
for
Rural
Households in India in 2003
people obtain loans from
Traders
various sources. The
various types of loans
3% Relatives and
Friends
can be conveniently
30%
7%
grouped as formal
Others
Moneylenders
sector loans and
7%
informal sector loans.
Among the former
Landlords 1 %
are loans from banks
27%
25%
and cooperatives. The
Cooperative
Commercial
informal lenders include
Societies
Banks
moneylenders, traders,
employers, relatives and
friends, etc. In Graph 1
you can see the various
sources of credit to rural
households in India. Is more credit
the RBI sees that the banks give loans
not just to profit-making businesses
coming from the formal sector or the
and traders but also to small
informal sector?
cultivators, small scale industries, to
The Reserve Bank of India
small borrowers etc. Periodically,
supervises the functioning of formal
banks have to submit information to
sources of loans. For instance, we
the RBI on how much they are
have seen that the banks maintain a
lending, to whom, at what interest
minimum cash balance out of the
rate, etc.
deposits they receive. The RBI
monitors that the banks actually
There is no organisation which
supervises the credit activities of
maintain the cash balance. Similarly,
lenders in the informal sector. They
BUT WHY SHOULD
can lend at whatever interest rate they
A BANK WANT US TO
HAVE A HIGHER INCOME?
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choose. There is no one to stop them
from using unfair means to get their
money back.
Compared to the formal lenders,
most of the informal lenders charge a
much higher interest on loans. Thus,
the cost to the borrower of informal
loans is much higher.
Higher cost of borrowing means a
larger part of the earnings of the
borrowers is used to repay the loan.
Hence, borrowers have less income
left for themselves (as we saw for
Shyamal in Sonpur). In certain
cases, the high interest rate of
borrowing can mean that the amount
to be repaid is greater than the
income of the borrower. This could
lead to increasing debt (as we saw for
Rama in Sonpur) and debt trap. Also,
people who might wish to start an
enterprise by borrowing may not do
so because of the high cost of
borrowing.
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Most loans from informal lenders
carry a very high interest rate and do
little to increase the income of the
borrowers. Thus, it is necessary
that banks and cooperatives
increase their lending particularly
in the rural areas, so that the
dependence on informal sources
of credit reduces.
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their earlier loans. However, the
moneylenders charge very high rates
of interest, keep no records of the
transactions and harass the poor
borrowers.
In recent years, people have tried
out some newer ways of providing
loans to the poor. The idea is to
organise rural poor, in particular
women, into small Self Help Groups
(SHGs) and pool (collect) their
savings. A typical SHG has 15-20
members, usually belonging to one
neighbourhood, who meet and save
regularly. Saving per member varies
from Rs 25 to Rs 100 or more,
depending on the ability of the people
to save. Members can take small loans
from the group itself to meet their
needs. The group charges interest on
these loans but this is still less than
what the moneylender charges. After
a year or two, if the group is regular
in savings, it becomes eligible for
availing loan from the bank.
Loan is sanctioned in the
name of the group and is
meant to create selfemployment opportunities
for the members. For
instance, small loans are
provided to the members for
releasing mortgaged land,
for meeting working capital
needs (e.g. buying seeds,
fertilisers, raw materials
like bamboo and cloth), for
housing materials, for
acquiring assets like sewing
machine, handlooms, cattle,
etc.
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Grameen Bank of Bangladesh
Grameen Bank of Bangladesh is one of the
biggest success stories in reaching the poor to
meet their credit needs at reasonable rates.
Started in the 1970s as a small project,
Grameen Bank now has over 6 million
borrowers in about 40,000 villages spread
across Bangladesh. Almost all of the borrowers
are women and belong to poorest sections of
the society. These borrowers have proved that
not only are poor women reliable borrowers,
but that they can start and run a variety of
small income-generating activities successfully.
SUMMING UP
In this chapter we have looked at the
modern forms of money and how they
are linked with the banking system.
On one side are the depositors who
keep their money in the banks and on
the other side are the borrowers who
take loans from these banks. Economic
activities require loans or credit. Credit,
as we saw can have a positive impact,
or in certain situations make the
borrower worse off.
Credit is available from a variety of
sources. These can be either formal
sources or informal sources. Terms of
EXERCISES
1. In situations with high risks, credit might create further problems for the borrower.
Explain.
2. How does money solve the problem of double coincidence of wants? Explain with
an example of your own.
3. How do banks mediate between those who have surplus money and those who
need money?
4. Look at a 10 rupee note. What is written on top? Can you explain this statement?
5. Why do we need to expand formal sources of credit in India?
6. What is the basic idea behind the SHGs for the poor? Explain in your own words.
7. What are the reasons why the banks might not be willing to lend to certain borrowers?
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8. In what ways does the Reserve Bank of India supervise the functioning of banks?
Why is this necessary?
9. Analyse the role of credit for development.
10. Manav needs a loan to set up a small business. On what basis will Manav decide
whether to borrow from the bank or the moneylender? Discuss.
11. In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the
small farmer.
(d) Suggest some ways by which small farmers can get cheap credit.
12. Fill in the blanks:
(i) Majority of the credit needs of the _________________households are met
from informal sources.
(ii) ___________________costs of borrowing increase the debt-burden.
(iii) __________________ issues currency notes on behalf of the Central
Government.
(iv) Banks charge a higher interest rate on loans than what they offer on
__________.
(v) _______________ is an asset that the borrower owns and uses as a guarantee
until the loan is repaid to the lender.
13. Choose the most appropriate answer.
(i) In a SHG most of the decisions regarding savings and loan activities are taken by
(a) Bank.
(b) Members.
(c) Non-government organisation.
(ii) Formal sources of credit does not include
(a) Banks.
(b) Cooperatives.
(c) Employers.
Next, classify the people into two groups based on whom you think might get a bank
loan and those who might not. What is the criterion that you have used for classification?
M ONEY
AND
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NOTESFORTHETEACHER
CHAPTER 4 : GLOBALISATION AND THE INDIAN ECONOMY
Most regions of the world are getting increasingly
interconnected. While this interconnectedness
across countries has many dimensions
cultural, political, social and economic this
chapter looks at globalisation in a more limited
sense. It defines globalisation as the integration
between countries through foreign trade and
foreign investments by multinational
corporations (MNCs). As you will notice, the more
complex issues of portfolio investment have been
left out.
If we look at the past thirty years or so, we
find that MNCs have been a major force in the
globalisation process connecting distant regions
of the world. Why are the MNCs spreading their
production to other countries and what are the
ways in which they are doing so? The first part
of the chapter discusses this. Rather than
relying on quantitative estimates, the rapid rise
and influence of the MNCs has been shown
through a variety of examples, mainly drawn
from the Indian context. Note that the examples
are an aid to explain a more general point. While
teaching, the emphasis should be on the ideas
and examples are to be used as illustrations.
You can also creatively use comprehension
passages like the one given after Section II to
test and reinforce new concepts.
Integration of production and integration of
markets is a key idea behind understanding the
process of globalisation and its impact. This has
been dealt with at length in this chapter,
highlighting the role of MNCs in the process. You
have to ensure that the students grasp this idea
with sufficient clarity, before moving on to the
next topic.
Globalisation has been facilitated by several
factors. Three of these have been highlighted:
rapid improvements in technology, liberalisation
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GLOBALISATION
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PRODUCTION ACROSS COUNTRIES
Until the middle of the twentieth
century, production was largely
organised within countries. What
crossed the boundaries of these
countries were raw materials, food
stuff and finished products. Colonies
such as India exported raw materials
and food stuff and imported finished
goods. Trade was the main channel
connecting distant countries. This was
before large companies called
Spreading of Production
by an MNC
A large MNC, producing industrial equipment, designs its
products in research centres in the United States, and then
has the components manufactured in China. These are then
shipped to Mexico and Eastern Europe where the products
are assembled and the finished products are sold all over the
world. Meanwhile, the companys customer care is carried out
through call centres located in India.
This is a call centre in Bangalore, equipped with telecom facilities and access to
Internet to provide information and support to customers abroad.
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In this example the MNC is not only
selling its finished products globally,
but more important, the goods and
services are produced globally. As
a result, production is organised in
increasingly complex ways. The
production process is divided into
small parts and spread out across the
globe. In the above example, China
provides the advantage of being a
cheap manufacturing location.
Mexico and Eastern Europe are useful
G LOBALISA
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AND THE
WE WILL SHIFT
THIS FACTORY TO
ANOTHER COUNTRY.
IT HAS BECOME
EXPENSIVE HERE!
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But the most common route for
MNC investments is to buy up local
companies and then to expand
production. MNCs with huge wealth
can quite easily do so. To take an
example, Cargill Foods, a very large
American MNC, has bought over
smaller Indian companies such as
Parakh Foods. Parakh Foods had
built a large marketing network in
various parts of India, where its brand
was well-reputed. Also, Parakh Foods
had four oil refineries, whose control
has now shifted to Cargill. Cargill is
now the largest producer of edible oil
in India, with a capacity to make 5
million pouches daily!
In fact, many of the top MNCs
have wealth exceeding the entire
budgets of the developing country
governments. With such enormous
wealth, imagine the power and
influence of these MNCs!
Theres another way in which
MNCs control production. Large
MNCs in developed countries place
orders for production with small
producers. Garments, footwear,
sports items are examples of
industries where production is
carried out by a large number of
small producers around the world.
Women at home in Ludhiana making footballs for large MNCs
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LETS WORK THESE OUT
Ford Motors, an American
company, is one of the
worlds largest
automobile manufacturers
with production spread
over 26 countries of the
world. Ford Motors came
to India in 1995 and
spent Rs. 1700 crore to
set up a large plant near
Chennai. This was done
in collaboration with
Mahindra and Mahindra,
a major Indian
manufacturer of jeeps
and trucks. By the year
2004, Ford Motors was
selling 27, 000 cars in
the Indian markets,
while 24,000 cars were
exported from India to
South Africa, Mexico and
Brazil. The company
wants to develop Ford
India as a component
supplying base for its
other plants across the
globe.
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ade
fect of foreign tr
Let us see the ef
ys
ple of Chinese to
through the exam
.
ts
arke
in the Indian m
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In general, with the opening of
trade, goods travel from one market
to another. Choice of goods in the
markets rises. Prices of similar goods
in the two markets tend to become
equal. And, producers in the two
countries now closely compete against
each other even though they are
separated by thousands of miles!
Foreign trade thus results in
connecting the markets or
integration of markets in different
countries.
WHAT IS GLOBALISATION?
In the past two to three decades, more
and more MNCs have been looking for
locations around the world which
would be cheap for their production.
Foreign investment by MNCs in these
countries has been rising. At the same
time, foreign trade between countries
has been rising rapidly. A large part
of the foreign trade is also controlled
by MNCs. For instance, the car
manufacturing plant of Ford Motors
in India not only produces cars for the
Indian markets, it also exports cars
to other developing countries and
exports car components for its many
factories around the world. Likewise,
activities of most MNCs involve
substantial trade in goods and also
services.
BE CAREFUL! THATS
OUR WORLD YOURE
PLAYING WITH!
SOMEDAY YOULL
HAVE TO PAY THE
PRICE!
GLOBALISATION
IS FUN!
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The result of greater foreign
investment and greater foreign trade
has been greater integration of
production and markets across
countries. Globalisation is this
process of rapid integration or
interconnection between countries.
MNCs are playing a major role in
the globalisation process. More
and more goods and services,
investments and technology are
moving between countries. Most
regions of the world are in closer
Containers for
transport of goods
Goods are placed in containers
that can be loaded intact onto
ships, railways, planes and trucks.
Containers have led to huge
reduction in port handling costs
and increased the speed with
which exports can reach markets.
Similarly, the cost of air transport
has fallen. This has enabled much
greater volumes of goods being
transported by airlines.
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Even more remarkable have been
the developments in information and
communication technology. In
recent times, technology in the areas
of telecommunications, computers,
Internet has been changing rapidly.
Telecommunication facilities (telegraph, telephone including mobile
phones, fax) are used to contact one
another around the world, to access
information instantly, and to
communicate from remote areas. This
has been facilitated by satellite
communication devices. As you
would be aware, computers have now
entered almost every field of activity.
You might have also ventured into the
...BUT WHERE
IS THE
ELECTRICITY?...
chnology
mmunication te
co
d
an
n
io
at
Inform
role in
s played a major
(or IT in short) ha
rvices
oduction of se
spreading out pr
w.
s. Let us see ho
across countrie
Using IT in
Globalisation
A news magazine published for London
readers is to be designed and printed in
Delhi. The text of the magazine is sent
through Internet to the Delhi office. The
designers in the Delhi office get
orders on how to design the magazine
from the office in London using
telecommunication facilities. The
designing is done on a computer. After
printing, the magazines are sent by air
to London. Even the payment of money
for designing and printing from a bank
in London to a bank in Delhi is done
instantly through the Internet
(e-banking)!
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Liberalisation of foreign trade
and foreign investment
policy
Let us return to the example of imports
of Chinese toys in India. Suppose the
Indian government puts a tax on
import of toys. What would happen?
Those who wish to import these toys
would have to pay tax on this.
Because of the tax, buyers will have
to pay a higher price on imported toys.
Chinese toys will no longer be as
cheap in the Indian markets and
imports from China will automatically
reduce. Indian toy-makers will
prosper.
Tax on imports is an example of
trade barrier. It is called a barrier
because some restriction has been set
up. Governments can use trade
barriers to increase or decrease
(regulate) foreign trade and to decide
what kinds of goods and how much
of each, should come into the country.
The Indian government, after
Independence, had put barriers to
foreign trade and foreign investment.
This was considered necessary to
protect the producers within the
country from foreign competition.
Industries were just coming up in the
1950s and 1960s, and competition
from imports at that stage would not
have allowed these industries to come
up. Thus, India allowed imports
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WORLD TRADE ORGANISATION
We have seen that the liberalisation of
foreign trade and investment in India
was supported by some very powerful
international organisations. These
organisations say that all barriers to
foreign trade and investment are
harmful. There should be no barriers.
Trade between countries should be
free. All countries in the world
should liberalise their policies.
World Trade Organisation (WTO) is
one such organisation whose aim is
to liberalise international trade.
Started at the initiative of the
developed countries, WTO establishes
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LETS WORK THESE OUT
1. Fill in the blanks.
WTO was started at the initiative of __________countries. The aim of the WTO is to
____________________. WTO establishes rules regarding ________________ for
all countries, and sees that ___________________ In practice, trade between countries
is not ______________________________. Developing countries like India have
___________________, whereas developed countries, in many cases, have continued
to provide protection to their producers.
2. What do you think can be done so that trade between countries is more fair?
3. In the above example, we saw that the US government gives massive sums of money
to farmers for production. At times, governments also give support to promote production
of certain types of goods, such as those which are environmentally friendly. Discuss
whether these are fair or not.
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Steps to Attract Foreign Investment
In recent years, the central and state
governments in India are taking special
steps to attract foreign companies to
invest in India. Industrial zones, called
Special Economic Zones (SEZs), are
being set up. SEZs are to have world class
facilities: electricity, water, roads,
transport, storage, recreational and
educational facilities. Companies who set
up production units in the SEZs do not
have to pay taxes for an initial period of
five years.
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Small producers: Compete or perish
For a large number of small producers and
workers globalisation has posed major
challenges.
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Competition and Uncertain Employment
Globalisation and the pressure of competition have substantially changed the lives
of workers. Faced with growing competition, most employers these days prefer to
employ workers flexibly. This means that workers jobs are no longer secure.
Let us see how the workers in the garment export industry
in India are having to bear this pressure of competition.
Factory workers folding garments for export. Though globalisation has created opportunities for paid work for
women, the condition of employment shows that women are denied their fair share of benefits.
G LOBALISA
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A Garment Worker
many
35 year old Sushila has spent
ort
exp
years as a worker in gar ment
yed
industry of Delhi. She was emplo
to
d
itle
ent
r
rke
as a permanent wo
d,
fun
ent
vid
health insurance, pro
wh en
ove rtim e at a dou ble rat e,
late
Sushilas factory closed in the
for
job
a
for
ing
rch
1990s. After sea
30
job
a
got
six months, she finally
n
Eve
s.
km. away from where she live
y for
aft er wo rki ng in thi s fac tor
ary
por
tem
a
is
several years, she
f of
hal
n
tha
worker and ear ns less
.
lier
ear
wh at she wa s ear nin g
ry
eve
Su shi la lea ves her hou se
7:30
at
ek
we
a
s
morning, seven day
day
A
.
p.m
a.m. and returns at 10
She
ge.
off from work means no wa
used
has none of the benefits she
to her
to get earlier. Factories closer
ers
ord
ting
tua
home have widely fluc
.
and therefore pay even less
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The conditions of work and the hardships of the workers described above
have become common to many industrial units and services in India. Most
workers, today, are employed in the unorganised sector. Moreover, increasingly
conditions of work in the organised sector have come to resemble the
unorganised sector. Workers in the organised sector such as Sushila no longer
get the protection and benefits that they enjoyed earlier.
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SUMMING UP
In this chapter, we looked at the
present phase of globalisation.
Globalisation is the process of
rapid integration of countries.
This is happening through
greater foreign trade and foreign
investment. MNCs are playing a
major role in the globalisation
process. More and more MNCs
are looking for locations around
the world that are cheap for their
production. As a result,
production is being organised
in complex ways.
Technology, particularly IT,
has played a big role in
organising production across
countries.
In addition,
liberalisation of trade and
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EXERCISES
1 What do you understand by globalisation? Explain in your own words.
2. What was the reasons for putting barriers to foreign trade and foreign investment by
the Indian government? Why did it wish to remove these barriers?
3. How would flexibility in labour laws help companies?
4. What are the various ways in which MNCs set up, or control, production in other
countries?
5. Why do developed countries want developing countries to liberalise their trade and
investment? What do you think should the developing countries demand in return?
6. The impact of globalisation has not been uniform. Explain this statement.
7. How has liberalisation of trade and investment policies helped the globalisation
process?
8. How does foreign trade lead to integration of markets across countries? Explain
with an example other than those given here.
9. Globalisation will continue in the future. Can you imagine what the world would be
like twenty years from now? Give reasons for your answer.
10.Supposing you find two people arguing: One is saying globalisation has hurt our
countrys development. The other is telling, globalisation is helping India develop.
How would you respond to these organisations?
11. Fill in the blanks.
Indian buyers have a greater choice of goods than they did two decades back. This
is closely associated with the process of ______________. Markets in India are selling
goods produced in many other countries. This means there is increasing
______________ with other countries. Moreover, the rising number of brands that we
see in the markets might be produced by MNCs in India. MNCs are investing in India
because _____________ ___________________________________________ . While
consumers have more choices in the market, the effect of rising _______________
and ______________has meant greater _________________among the producers.
12.Match the following.
(i) MNCs buy at cheap rates from small
producers
(a) Automobiles
(iii) Indian companies who have invested abroad (c) Call centres
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13.Choose the most appropriate option.
(i)
(ii) The most common route for investments by MNCs in countries around the
world is to
(a) set up new factories.
(b) buy existing local companies.
(c) form partnerships with local companies.
(iii) Globalisation has led to improvement in living conditions
(a) of all the people
(b) of people in the developed countries
(c) of workers in the developing countries
(d) none of the above
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NOTESFORTHETEACHER
CHAPTER 5 : CONSUMER RIGHTS
This chapter proposes to discuss the issue of
consumer rights within the context of the ways
markets operate in our country. There are many
aspects of unequal situations in a market and
poor enforcement of rules and regulations. Hence,
there is a need to sensitise learners and encourage
them to participate in the consumer movement.
This chapter provides case histories how some
consumers were exploited in a real life situation
and how legal institutions helped consumers in
getting compensated and in upholding their rights
as consumers. The case histories would enable
the students to link these narratives to their life
experiences. We have to enable students to
understand that the awareness of being a wellinformed consumer arose out of consumer
movement and active participation of people
through their struggles over a long period. This
chapter also provides details of a few
organisations helping consumers in different
ways. Finally it ends with some critical issues of
the consumer movement in India.
Aspects of Teaching / Sources of Information
This chapter has questions, case studies and
activities. It would be preferred that students
discuss these in groups orally. Some of these
could be answered in writing individually.
While carrying out each activity you could
start with a brainstorming session about the
activity. Similarly there are many opportunities
for role-play in this chapter and this could be a
useful way to share their experiences and
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CHAPTER 5
CONSUMER
The collage you see below contains
some news clippings of consumer
court verdicts. Why did the people go
to the consumer court in these cases?
These verdicts came about because
some people persisted and struggled
to get justice. In what ways were they
denied justice? More importantly,
RIGHTS
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THE CONSUMER IN THE MARKETPLACE
We participate in the market both as
producers and consumers. As
producers of goods and services we
could be working in any of the sectors
discussed earlier such as agriculture,
industry, or services. Consumers
participate in the market when they
purchase goods and services that they
need. These are the final goods that
people as consumers use.
In the preceding chapters we
discussed the need for rules and
regulations or steps that would
promote development. These could be
for the protection of workers in the
unorganised sector or to protect
people from high interest rates
charged by moneylenders in the
informal sector. Similarly, rules and
regulations are also required for
protecting the environment.
For example, moneylenders in the
informal sector that you read about
in Chapter 3 adopt various tricks to
bind the borrower: they could make
the producer sell the produce to them
at a low rate in return for a timely loan;
they could force a small farmer like
Swapna to sell her land to pay back
the loan. Similarly, many people who
work in the unorganised sector have
to work at a low wage and accept
conditions that are not fair and are
also often harmful to their health. To
prevent such exploitation, we
have talked of rules and regulations
for their protection. There are
organisations that have struggled
for long to ensure that these rules are
followed.
THEY PURPOSELY MADE IT
SO IT WOULD FALL APART
AFTER A FEW MONTHS SO
THAT I WILL BUY A NEW ONE!
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the world as the most scientific
product claiming this to be better
than mothers milk. It took years of
struggle before the company was
forced to accept that it had been
making false claims. Similarly, a
long battle had to be fought with
court cases to make cigarettemanufacturing companies accept that
their product could cause cancer.
Hence, there is a need for rules and
regulations to ensure protection for
consumers.
EVERYONE KNOWS
TOBACCO KILLS PEOPLE,
BUT WHO CAN SAY THAT
TOBACCO COMPANIES
SHOULD NOT BE FREE
TO SELL TOBACCO?
CONSUMER MOVEMENT
The consumer movement arose out
of dissatisfaction of the consumers
as many unfair practices were being
indulged in by the sellers. There was
no legal system available to
consumers to protect them from
exploitation in the marketplace. For
a long time, when a consumer was
not happy with a particular brand
product or shop, he or she generally
avoided buying that brand product,
or would stop purchasing from that
shop. It was presumed that it was
the responsibility of consumers to be
careful while buying a commodity
or service. It took many years for
organisations in India, and around
the world, to create awareness
amongst people. This has also
shifted the responsibility of ensuring
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Consumers International
In 1985 United Nations adopted
the UN Guidelines for Consumer
Protection. This was a tool for
nations to adopt measures to
protect consumers and for
consumer advocacy groups to
press their governments to do
so. At the international level, this
has become the foundation for
consumer movement. Today,
Consumers International has
become an umbrella body of 240
organisations from over 100
countries.
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CONSUMER RIGHTS
SAFETY IS EVERYONES RIGHT
Rejis Suffering
Reji Mathew, a healthy boy studying in
Class IX, was admitted in a private clinic in
Kerala for removal of tonsils. An ENT
surgeon perfor med the tonsillectomy
operation under general anaesthesia. As a
result of improper anaesthesia Reji showed
symptoms of some brain abnormalities
because of which he was crippled for life.
His father filed a complaint in the State
Consumer Disputes Redressal Commission
claiming compensation of Rs 5,00,000 for
medical negligence and deficiency, in
service. The State Commission, saying that
the evidence was not sufficient dismissed
it. Rejis father appealed again in the
National Consumer Disputes Redressal
Commission located
in New Delhi. The
National Commission
after looking into the
complaint, held the
hospital responsible
for medical negligence
and directed it to pay
the compensation.
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Information about goods and
services
When you buy any commodity, you
will find certain details given on the
packing. These details are about
ingredients used, price, batch
number, date of manufacture, expiry
date and the address of the
manufacturer. When we buy
medicines, on the packets, you might
find directions for proper use and
information relating to side effects and
risks associated with usage of that
medicine. When you buy garments,
you will find information on
instructions for washing.
Why is it that rules have been made
so that the manufacturer displays this
information? It is because consumers
have the right to be informed about
the particulars of goods and services
that they purchase. Consumers
can then complain and ask for
compensation or replacement if the
product proves to be defective in any
manner. For example, if we buy a
Waiting...
Amritha, an engineering
graduate after submitting all
the certificates and attending
the interview for a job in a
government department, did
not receive any news of the
result. The officials also
refused to comply with her
queries. She therefore filed an
application using the RTI Act
saying that it was her right to
know the result in a
reasonable time so that she
could plan her future. She
soon got her call letter for
appointment.
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LETS WORK THESE OUT
1. When we buy commodities we find that the price charged is sometimes higher or
lower than the Maximum Retail Price printed on the pack. Discuss the possible
reasons. Should consumer groups do something about this?
2. Pick up a few packaged goods that you want to buy and examine the information
given. In what ways are they useful? Is there some information that you think
should be given on those packaged goods but is not? Discuss.
3. People make complaints about the lack of civic amenities such as bad roads or
poor water and health facilities but no one listens. Now the RTI Act gives you the
power to question. Do you agree? Discuss.
A Refund
Abirami, a student of
Ansari Nagar, joined a twoyear course at a local
coaching institute for
professional courses in
New Delhi. At the time of
joining the course, she
paid the fees Rs 61,020
as lumpsum for the entire
course of two years.
However, she decided to opt out of the
course at the end of one year as she
found that the quality of teaching was
not up to the mark. When she asked
for a refund of the fee for one year, it
was denied to her.
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LETS WORK THIS OUT
The following are some of the catchy advertisements of products that we purchase
from the market. Which of the following offers would really benefit consumers? Discuss.
z
Buy shoes worth Rs 2000 and get one pair of shoes worth Rs 500 free.
1.
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3.
5.
4.
6.
JUDGE ANNOUNCES
9. THE
THE COURT VERDICT.
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The consumer movement in India
has led to the formation of various
organisations locally known as
consumer forums or consumer
protection councils. They guide
consumers on how to file cases in the
consumer court. On many occasions,
they also represent individual
consumers in the consumer courts.
These voluntary organisations also
receive financial support from the
government for creating awareness
among the people.
If you are living in a residential
colony, you might have noticed
name boards of Resident Welfare
Associations. If there is any unfair
trade practice meted out to their
members they take up the case on
their behalf.
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of our rights? Look at the posters on
the right and in the previous page.
What do you think?
The enactment of COPRA has led
to the setting up of separate
departments of Consumer Affairs in
central and state governments. The
posters that you have seen are one
example through which government
spread information about legal
process which people can use.
You might also be seeing such
advertisements on television channels.
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LETS WORK THESE OUT
1.
Look at the posters and cartoons in this chapter. Think of any particular commodity
and the aspects that need to be looked at as a consumer. Design a poster for this.
2.
3.
What is the difference between consumer protection council and consumer court?
4.
The Consumer Protection Act 1986 ensures the following as rights which every
consumer in India should possess
(i) Right to choice.
(ii) Right to information.
(iii) Right to redressal.
(iv)
(v)
(vi)
Right to representation.
Right to safety.
Right to consumer education.
Categorise the following cases under different heads and mark against each in
brackets.
(a) Lata got an electric shock from a newly purchased iron. She complained to the
shopkeeper immediately. (
)
(b) John is dissatisfied with the services provided by MTNL for the past few months.
He files a case in the District Level Consumer Forum. (
)
(c) Your friend has been sold a medicine that has crossed the expiry date and you
are advising her to lodge a complaint (
).
(d) Iqbal makes it a point to scan through all the particulars given on the pack of any
item that he buys. (
)
(e) You are not satisfied with the services of the cable operator catering to your
locality but you are unable to switch over to anybody else. (
)
(f) You realise that you have received a defective camera from a dealer. You are
complaining to the head office persistently (
).
5.
If the standardisation ensures the quality of a commodity, why are many goods
available in the market without ISI or Agmark certification?
6.
Find out the details of who provides Hallmark and ISO certification.
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time for filing and attending the court
proceedings etc. In most purchases
cash memos are not issued hence
evidence is not easy to gather.
Moreover most purchases in the
market are small retail sales. The
existing laws also are not very clear
on the issue of compensation to
consumers injured by defective
products. After 20 years of the
enactment of COPRA, consumer
awareness in India is spreading but
slowly. Besides this the enforcement
EXERCISES
1. Why are rules and regulations required in the marketplace? Illustrate with a few examples.
2. What factors gave birth to the consumer movement in India? Trace its evolution.
3. Explain the need for consumer consciousness by giving two examples.
4. Mention a few factors which cause exploitation of consumers.
5. What is the rationale behind the enactment of Consumer Protection Act 1986?
6. Describe some of your duties as consumers if you visit a shopping complex in your locality.
7. Suppose you buy a bottle of honey and a biscuit packet. Which logo or mark you will have
to look for and why?
8. What legal measures were taken by the government to empower the consumers in India?
9. Mention some of the rights of consumers and write a few sentences on each.
10. By what means can the consumers express their solidarity?
11. Critically examine the progress of consumer movement in India.
12. Match the following.
(i) Availing details of ingredients of a product
(a)
Right to safety
(ii) Agmark
(b)
(c)
(d)
(e)
Right to information
C ONSUMER R IGHTS
87
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(iii) When a consumer feels that he has been exploited, he must file a case in
the District Consumer Court.
(iv) It is worthwhile to move to consumer courts only if the damages incurred
are of high value.
(v) Hallmark is the certification maintained for standardisation of jewellry.
(vi) The consumer redressal process is very simple and quick.
(vii) A consumer has the right to get compensation depending on the degree of
the damage.
Buyers, Beware
Consumers be cautious
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Always Sometimes Never
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SUGGESTED READINGS
Books
Abijit Vinayak Banerjee, Roland Benabou and Dilip Mookherjee (eds.),
Understanding Poverty, Oxford University Press, New York, 2006.
Amit Bhaduri and Deepak Nayyar, Intelligent Persons Guide to Liberalisation,
Penguin Books, New Delhi, 1996.
Amit Bhaduri, Development with Dignity: The Case for Full Employment, National
Book Trust, New Delhi, 2005.
Amit Bhaduri, Macroeconomics: The Dynamics of Commodity Production,
Macmillan, London, 1986.
Bimal Jalan (ed.), Indian Economy, Penguin Books, New Delhi, 2002.
CUTS, Is it Really Safe, Consumer Unity Trust Society, Jaipur, 2004.
CUTS, State of the Indian Consumer: Analyses of the Implementation of the United
Nations Guidelines for Consumer Protection, 1985 in India, Consumer Unity
Trust Society, Jaipur, 2001.
Indrani Mazumdar, Women and Globalisation: The Impact on Women Workers in
the Formal and Informal Sectors in India, Stree, Delhi, 2007.
Jagdish Bhagwati In Defence of Globalisation, Oxford University Press, Delhi, 2004.
Jan Breman and Parthiv Shah, Working in the mill no more, Oxford University
Press, Delhi, 2005.
Jan Breman, Footloose Labour: Working in Indias Informal Economy, Cambridge
University Press, Cambridge, 1996.
Jean Dreze and Amartya Sen, India: Development and Participation, Oxford
University Press, Delhi, Third Impression, 2007.
John K.Galbraith, Money: Whence it Came, Whence it Went, Indian Book Company,
New Delhi, 1975.
Joseph Stiglitz, Globalisation and its Discontents, Penguin Books India,
New Delhi, 2003.
National Consumer Disputes Redressal Commission, Landmark Judgments on
Consumer Protection, Universal Law Publishing Co., Delhi, 2005.
Tirthankar Roy, The Economic History of India, 1857-1947, Oxford University
Press, Delhi, Second Edition, 2006.
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Government Publications
Ministry of Finance, Economic Survey, Government of India.
NSSO, Key Results of Employment-Unemployment Rounds, National Sample Survey
Organisation, Ministry of Statistics and Programme Implementation, Govt
of India, New Delhi.
Planning Commission, National Human Development Report 2001, Government
of India, New Delhi.
Other Reports
Reserve Bank of India, Handbook of Statistics on Indian Economy, Mumbai.
UNDP, Human Development Report 2006, United Nations Development Programme,
Geneva.
World Bank, World Development Indicators, The World Bank, Washington.
World Bank, World Development Indicators, The World Bank, Washington.
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Notes
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